Right click on image and open image in new tab if text is too blurry....

70.2K

Verified Solution

Question

Finance

image

Right click on image and open image in new tab if text is too blurry.

Please type out your answer or use Excel as it is easier to read than handwriting.

EBIT Sensitivity Stewart Industries sells its finished product for $9.11 per unit. Its fixed operating costs are $18,700, and the variable operating cost per unit is $4.41. a. Calculate the firm's earnings before interest and taxes (EBIT) for sales of 12,000 units. b. Calculate the firm's EBIT for sales of 11,000 and 13,000 units, respectively. c. Calculate the percentage changes in sales (from the 12,000-unit base level) and associated percentage changes in EBIT for the shifts in sales indicated in part (b). d. On the basis of your findings in part (c), comment on the sensitivity of changes in EBIT in response to changes in sales. a. The firm's earnings before interest and taxes is $ (Round to the nearest dollar.) b. The EBIT for the 11,000 units level is $. (Round to the nearest dollar.) The EBIT for the 13,000 units level is $. (Round to the nearest dollar.) c. The change in sales as a percentage for the 11,000 units level is %. (Round to one decimal place.) The change in sales as a percentage for the 13.000 units level is%. (Round to one decimal place.) The change in EBIT as a percentage for the 11,000 units level is %. (Round to one decimal place.) The change in EBIT as a percentage for the 13,000 units level is %. (Round to one decimal place.) d. On the basis of your findings in part (c), comment on the sensitivity of changes in EBIT in response to changes in sales. (Select the best answer below.) O A. EBIT is more sensitive to changing sales levels; it increases/decreases about twice as much as sales. OB. Changes in sales have no effect on EBIT as long as the costs are the same. O C. EBIT is less sensitive to changing sales levels; it increases/decreases half as much as sales. OD. EBIT and sales are equally sensitive to changing sales levels; they increase/decrease the same as sales

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students